|Original language||English (US)|
|Title of host publication||The New Palgrave Dictionary of Economics|
|Editors||Steven Drulauf, Lawrence E Blume|
|State||Published - 2008|
Ricardian trade theory takes cross-country technology differences as the basis of trade. By abstracting from the roles of factor endowment and factor intensity differences, which are the primary concerns of factor proportions theory, Ricardian trade theory offers a simple and yet powerful framework within which to examine the effects of country sizes, of technology changes and transfers, and of income distributions. Moreover, its simple production structure makes it relatively easy to allow for many goods and many countries, and hence capable of generating valuable insights which are lost in the standard two-country, two-sector model of international trade.